Did the Fed Just Warn The Debt Bubble Is Beginning to Burst?

While everyone is focusing on political issues, the NY Fed published a stunning report on the state of the US consumer.
According to the NY Fed, the average US household has hit a new record for debt, surpassing the old record set at the peak of the 2007 bubble.

Put simply, the average US household today is more in debt that it was in late 2007: the former peak of a massive debt bubble.
Of course, revealing that we’re in a massive debt bubble is only half the story. The more critical issue for those looking to invest based on this is when the debt bubble bursts.
Bad news… it’s starting already.

This post was published at GoldSeek on 16 August 2017.

FOMC Minutes Signal Balance Sheet Normalization Begins In September, Most Saw Inflation Pick Up

Since the July 26th ‘nothingburger’ FOMC statement, Nasdaq is down but bonds and bullion are higher as domestic politics and global war have trumped monetary machinations. All eyes in today’s Minutes will be on any mention of inflation and the balance sheet. The Fed sees inflation “picking up over the next couple years” but this came before last week’s dismal CPI/PPI data (and they noted “downside risks”), and confirmed that they will make a balance sheet move “at upcoming meeting.”
Additional headlines:
*MOST FED OFFICIALS SAW INFLATION PICK-UP OVER NEXT COUPLE YEARS *MOST FED OFFICIALS BACKED B/SHEET MOVE AT `AN UPCOMING MEETING’ However, The Fed is worried about inflation:

This post was published at Zero Hedge on Aug 16, 2017.

Stocks, Dollar & Yields Sink After Fed Warns Of “Elevated Vulnerabilities” From High Asset Prices

The initial reactions wre modest but directionally ‘correct’ given the dovish bias to the Fed Minutes – stocks are up, bonds are up (lower in yield), and the dollar is down. But then traders read the warnings that due to excessively easy financial conditions, “a tighter monetary policy than otherwise was warranted“, something Goldman has been warning about for months, and stocks sank.
To be sure, there were 3 very dovish quotes:
1. “Many participants, however, saw some likelihood that inflation might remain below 2 percent for longer than they currently expected, and several indicated that the risks to the inflation outlook could be tilted to the downside.” 2. “Participants agreed that a fall in longer-term inflation expectations would be undesirable, but they differed in their assessments of whether inflation expectations were well anchored.”
3. “Most Fed officials saw wage-price framework still valid”
Bonds and the dollar were following that bias…

This post was published at Zero Hedge on Aug 16, 2017.

Why Was This ‘Crowd Hire’ Company Recruiting $25 An Hour ‘Political Activists’ In Charlotte Last Week?

Trump ignited a political firestorm yesterday during an impromptu press conference in which he said there was “blame on both sides” for the tragic events that occurred in Charlottesville over the weekend.
Now, the discovery of a craigslist ad posted last Monday, almost a full week before the Charlottesville protests, is raising new questions over whether paid protesters were sourced by a Los Angeles based “public relations firm specializing in innovative events” to serve as agitators in counterprotests.
The ad was posted by a company called “Crowds on Demand” and offered $25 per hour to “actors and photographers” to participate in events in the “Charlotte, NC area.” While the ad didn’t explicitly define a role to be filled by its crowd of “actors and photographers” it did ask applicants to comment on whether they were “ok with participating in peaceful protests.” Here is the text from the ad:
Actors and Photographers Wanted in Charlotte

This post was published at Zero Hedge on Aug 16, 2017.

Grocery Store Turmoil in Chicago

Bankruptcies don’t help. Even the big chains are closing stores.
The grocery store sector is never static. Some stores close, others open. But in Chicago, 25 stores closed over the past 24 months due to bankruptcies or operational reasons, and only 16 stores have opened, producing ‘an alarming loss’ of 545,000 square feet of grocery store space.
This includes five independent grocery stores that closed, while only two new ones opened, bringing their total down to 43 stores. Their market share, based on square footage, declined to just 7%. This is ‘not a positive sign for improving the food deserts where these grocers penetrate more regularly,’ according to Mid-America Real Estate’s biennial Urban Grocery Study.
And the average store size shrank, as the stores that were closed averaged 38,000 square feet, while the stores that opened or are planned average 25,000 square feet.
The study covers the period from September 2015 to August 1, 2017, in an urban area of 3.2 million residents with 262 operating or proposed grocery stores of more than 10,000 square feet in size.
In addition to the current difficulties, Amazon’s entry looms over the grocery market. Whole Foods, which is being acquired by Amazon, has 13 stores in the area, nine of them ‘in primarily higher income’ locations. It has about 7% of the market on a square-footage basis. And the report finds that ‘consumers continue to anticipate the opening of Amazon Go stores or perhaps ‘combo’ sites of Amazon/Whole Foods part grocery-part fulfillment center.’

This post was published at Wolf Street on Aug 16, 2017.

China’s July Leverage Data Comes in Hot, Drawing Rebuke From IMF

It is often difficult to ascertain the actual level of credit and liquidity in China, as the ‘shadow banking’ segment is near $8.5 trillion strong. But China’s Total Social Financing (TSF) data, released Tuesday, attempts to do just that. China’s Leverage data came in hotter than anticipated, a Bernstein report noted. While the number decreased, it was due, in part, to a drop in shadow bank lending. But China’s Leverage reduction last month is not enough to satisfy the International Monetary Fund, which warned China is on a ‘dangerous trajectory,’ as debt is being used to engineer growth to an unhealthy degree, a charge China denies.
China’s Leverage TSF number hotter than anticipated, raising concern at the IMF
Amid deleveraging impacting corporates, state-owned enterprises and individuals, China was anticipated to have seen a July drop in TSF to nearly 1,000 billion yuan. That number came in at 1,220 billion yuan, down 32% on a month over month basis, as Chinese loan data in July is typically weaker than June. The problem for certain analysts is the loan data was 22% above consensus estimates, pointing to a growing leverage problem.

This post was published at FinancialSense on 08/16/2017.

AUGUST 16/TRUMP’S MANUFACTURING ADVISORY PANEL DISBANDS AFTER MANY PARTICIPANTS LEFT EARLIER: SENDS GOLD AND SILVER SKYROCKETING/GOLD UP $3.55 TO 1277.55 AND SILVER UP TO $16.95 FOR A GAIN OF 25 …

GOLD: $1277.55 UP $3.85
Silver: $16.95 UP 25 cent(s)
Closing access prices:
Gold $1282.95
silver: $17.11
SHANGHAI GOLD FIX: FIRST FIX 10 15 PM EST (2:15 SHANGHAI LOCAL TIME)
SECOND FIX: 2:15 AM EST (6:15 SHANGHAI LOCAL TIME)
SHANGHAI FIRST GOLD FIX: $1278.74 DOLLARS PER OZ
NY PRICE OF GOLD AT EXACT SAME TIME: $1273.70
PREMIUM FIRST FIX: $5.04
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
SECOND SHANGHAI GOLD FIX: $1274.86
NY GOLD PRICE AT THE EXACT SAME TIME: $1272.60
Premium of Shanghai 2nd fix/NY:$2.26
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
LONDON FIRST GOLD FIX: 5:30 am est $1270.15
NY PRICING AT THE EXACT SAME TIME: $1270.00
LONDON SECOND GOLD FIX 10 AM: $1272.25
NY PRICING AT THE EXACT SAME TIME. $1273.25
For comex gold:
AUGUST/
NOTICES FILINGS TODAY FOR APRIL CONTRACT MONTH: 32 NOTICE(S) FOR 3200 OZ.
TOTAL NOTICES SO FAR: 4579 FOR 457900 OZ (14.24 TONNES)
For silver:
AUGUST
15 NOTICES FILED TODAY FOR
75,000 OZ/
Total number of notices filed so far this month: 915 for 4,575,000 oz

This post was published at Harvey Organ Blog on August 16, 2017.

Bannon Breaks Silence: Slams “Far-Right Clowns”, Vows “Economic War With China”

After weeks of speculation about his future, Trump White House Chief Strategist Steve Bannon has broken free of his self-imposed exile, unloading a torrent of Scaramucci-esque comments to none other than Robert Kuttner – the editor of The American Prospect, a progressive publication (the cover lines on whose first two issues after Trump’s election were ‘Resisting Trump’ and ‘Containing Trump.”
Kuttner sets the surprising scene…
Trump’s embattled strategist phones me, unbidden, to opine on China, Korea, and his enemies in the administration… Needless to say, I was a little stunned to get an email from Bannon’s assistant midday Tuesday, just as all hell was breaking loose once again about Charlottesville, saying that Bannon wished to meet with me.
But unload Bannon did:
He began with China…

This post was published at Zero Hedge on Aug 16, 2017.

Retail Sales, Dudley, Wages

Some quick thoughts for the day.
First, New York Federal Reserve President William Dudley gave an extended interview to the Associate Press. Definitely worth the time to read. Some highlights:
1.) Dudley never put a Trump bump in his forecast, so his forecast is essentially unchanged:
I think we’re still on the same trajectory we’ve been on for several years. Above trend growth, gradually tightening labor market, inflation – somewhat below our objective – but we do expect as the labor market continues to tighten, to see firmer wage gains and that will ultimately filter into inflation moving up towards our 2% objective.
2.) He expects inflation numbers to improve. He wants us to ignore the year-over-year numbers (of course, recent month-over-month numbers are not great):
Well, the reason why inflation won’t get up to 2% very quickly on a year-over-year basis is because we’ve had these very low inflation readings over the last 4 or 5 months. So it’s going to take time for those to sort of drop out of the year-over-year calculation.

This post was published at FinancialSense on 08/16/2017.

Support for Hard Brexit in the UK Hardens

‘Significant economic damage’ is a ‘price worth paying.’ But businesses are not so sure.
Europhiles hoping that time might heal or at least narrow the rift separating the UK and the EU after last year’s Brexit vote are likely to be sorely disappointed by the findings of a new poll jointly conducted by Oxford University and London School of Economics.
The survey reveals that there is more support for harder Brexit options because Leavers and a substantial number of Remainers back them. The survey’s findings bolster the case for the hard-Brexit-or-nothing position favored (at least publicly) by British Prime Minister Theresa May. The alternative – a so-called ‘soft’ Brexit – would imply having to accept full freedom of movement for all EU citizens in return for some form of privileged access to the single market. Given that regaining control of UK borders was one of the key issues that swung the referendum in Brexit’s favor, such a proposition was always unlikely to sway a majority of British voters.
This new poll, for which 3,293 people were consulted, appears to be confirmation of that. A majority of Brits, including many Remainers, largely concur that Brexit should mean the UK taking back control over its borders, leaving the jurisdiction of the European Court of Justice, and paying only a small ‘divorce bill’ to the EU.

This post was published at Wolf Street on Aug 16, 2017.

BofA: “2018 Is When Bond Investors Again Get Very Concerned About Fundamentals”

One week ago, we closed the book on the long-running debate whether gross (and net) leverage is the highest on record, when we showed a chart from Goldman according to which net debt/EBITDA for all companies (with or without energy) is the highest on record, surpassing the previous credit bubble peak by nearly 0.3x turns. Furthermore, as Goldman said that the time, “given we are 8+ years into an economic expansion, we believe it’s prudent to also view this via a ‘normalized EBITDA’ lens (i.e., median NTM 2007Q1-2017Q1). On this basis, aggregate leverage (ex- Energy) would move up to 2.1x, roughly 20% higher than current levels and 18% above the prior cycle peak.”
Of course, none of the above matters right now; in fact if anything as Friday’s oversubscribed Tesla bond sale as well as yesterday’s massively oversubscribed sale of Amazon bonds confirmed, investors still can’t get enough of corporate debt.
But how much longer can this relentless re-leveraging continue before something snaps, or before someone finally pays attention? According to BofA’s chief credit strategist, Hans Mikkelsen, the answer is 2018.

This post was published at Zero Hedge on Aug 16, 2017.

US Housing Starts Decline 5.6% YoY In July (1 Unit Starts Back Rise To 1991 Levels, Apartment Construction Slowing)

According to the US Census Bureau, US housing construction starts declined 5.6% on a year-over-year (YoY) basis for July. You can see the declining trend since 2012.
Apartment (5+ unit) starts fell 22% YoY.
On a MoM basis, 1 unit starts declined only 0.47% in July while 5+ starts declined 17%.

This post was published at Wall Street Examiner on August 16, 2017.

The Two Things To Look For In Today’s FOMC Minutes

There are two, also known as non-GAAP four, things to look forward to in today’s FOMC Minutes: inflation, and balance sheet, balance sheet, balance sheet.
At 2pm, the FOMC will release the minutes of the July 25-26 meeting when, as expected, the Fed left its rate unchanged and gave few surprises in its characterization of the outlook. It did surprise many, however, by noting that it expects to begin implementing balance sheet normalization “relatively soon”, language which most had not expected to be introduced until September; this, as UBS notes, is the condition the FOMC set for unwinding its balance sheet, so we now see the Fed announcing its balance sheet normalization policy in September. While there will be no earthshattering revelations, look to the Minutes to shed additional light on the Committee’s debate on this timing and views on the outlook for inflation, which will determine future rate hikes.
Going back to the July 26 statement, the FOMC’s characterization of inflation was uninformative, merely reflecting the softness in the last several prints. In the minutes, some hope to find if the language reflects strongly held views that the softness is transitory, or if there were participants that wanted to raise more alarm about the inflationary outlook, but were outnumbered. Chair Yellen has been explicit that the outlook for inflation will determine the timing of future rate hikes.
Leading up to the meeting, Fed officials were explicit that they believe that inflation weakness is transitory but that they need to see evidence that inflation is rising before hiking again. Further complicating matters, the July CPI print – the fifth miss in a row – did not provide sufficient evidence. As a result, the breadth of inflation views within the Committee should inform the sellside’s calls on the next hike.

This post was published at Zero Hedge on Aug 16, 2017.

Trade Negotiations Begin, The Elite Fire Back With Threats – Episode 1357a

The following video was published by X22Report on Aug 16, 2017
Housing recovery has never happened, the central banks having been keeping the illusion ongoing but it is falling apart. US government and the central bank do not want the public to know about the real inflation, why because this would destroy their system. The Fed dropped the hint that the bubble is about pop. The NAFTA negotiations begin and the elite start off with threatening remarks.

Wages vs. Jobs

In Outside the Box today, my good friend Gary Shilling draws some crucial distinctions with respect to wage and jobs and explains why our perplexing US labor market is actually quite rational. Gary shares with me a fundamental optimism regarding our prospects for long-term economic growth, and in this report he tells us why.
This kind of in-depth dissection of macro trends is what Gary is known for. You can learn more about subscribing to his monthly Insight report and take advantage of a special offer for OTB readers at the conclusion of today’s letter.
[John is off-site this afternoon, doing research with some hedge fund managers, and so he hasn’t had time to write more here. He has asked us to go ahead and publish without his usual personal remarks. He’ll be back in full force in this weekend’s Thoughts from the Frontline.] John Mauldin, Editor
Outside the Box
Wages vs. Jobs
(Excerpted from the August 2017 edition of A. Gary Shilling’s INSIGHT newsletter)
Real wages have been stagnant in the U. S. and other developed countries for over a decade. As we’ve discussed in numerous past Insights, this has made people ‘mad as hell’ and has resulted in populist uprisings that spawned Brexit and the election of Donald Trump. Extremely aggressive monetary policy that reduced central bank-controlled interest rates to essentially zero did little to revive economic growth since creditworthy borrows already had plenty of money and banks, scared and chastened after the financial crisis, had little desire to lend to the rest.

This post was published at Mauldin Economics on AUGUST 16, 2017.

US Household Debt at Record Levels Not Seen Since 2008 Crisis

American household debt hit an all-time high in the second quarter of 2017, with increases in every major category, from credit cards, to student loans, to mortgages.
According to the latest quarterly household debt and credit report by the Federal Reserve Bank of New York, aggregate household debt increased for the 12th consecutive quarter. It now sits at $12.84 trillion, a level $164 billion higher than the previous peak of $12.68 trillion set in the third quarter of 2008. The level of household indebtedness in the US now stands at 69% of US GDP.
No wonder US Global Investors CEO Frank Holmes calls debt ‘the mother of all bubbles.’
Credit card debt eclipsed a record set during the summer of 2008. Americans carry $1,021.7 billion of revolving debt. Overall, credit card balances went up $4.1 billion in the month of July alone.

This post was published at Schiffgold on AUGUST 16, 2017.

One Trader Scoffs “Finally, A Market Where It’s Easy To Get Rich”

Sometimes you have to just throw in the towel, know when to fold ’em, and join ’em coz you can’t beat ’em.. and that appears to be former fund manager Richard Breslow’s take on the current utter apathy in markets currently. His message is clear – nothing matters except technical levels – which ironically, none other than CNBC’s-own Jim Cramer admitted this morning “the market is completely divorced from whatever is going on,” whioch presumably means “buy it all.”
Via Bloomberg,
That which does not kill us, makes us stronger. A much debated concept, but in terms of navigating markets, there’s a lot of truth in it. Asset prices have been all over the map during the last week. Good news mixing with ugly news. Well-laid plans having to consider great uncertainty.
But one positive outcome is we have technical levels, and close ones, for just about every stripe of security class to lean on and whatever your directional inclination.

This post was published at Zero Hedge on Aug 16, 2017.